Seemingly in an instant, the Coronavirus disease (COVID-19) pandemic upended U.S. consumer behaviors on how and what they eat. Preferred buying channels have suddenly shifted, exposing the rigidity and fragility of a system that we rely on to feed the nation and employ millions of people. Companies across the value chain face a reckoning on how to contend with major fluctuations that are expected to persist even as the virus abates.
In this rapidly evolving landscape, food and agriculture companies can’t let the challenges of today overshadow the need to reimagine for tomorrow. Your business may want to return to normal, but don’t expect the recent past to be the sector’s future again: fundamental changes are fueling new opportunities and better ways of working for forward-thinking companies, while others risk being left behind.
Three actions in particular will prove crucial to food and agriculture companies to be successful during and post-COVID-19:
1. Understand the implications of changing consumer preferences
The EY Future Consumer Index of 14,000 people globally shows the extent to which people have adapted to COVID-19 and modified their habits and expectations accordingly. Fully half of respondents believe the way they live their lives will significantly change in the long term, and 43% say that the way they shop will change over the next few years — with a growing interest in online grocery shopping, for example. Data points also show the increased importance of affordability, health and ethically sourced sustainable goods, preferably from local producers and companies.
In the agricultural space, there’s a definitive shift toward fresh food that will last after the pandemic — for instance, in mid-July, retail sales of fresh produce were over 12% higher compared to the year-ago period, according to Produce Blue Book. More in-home consumption — also including meal kits and trends like baking bread and growing your own vegetables — has staying power as well. Amid news of coronavirus outbreaks in meat-processing plants that disrupted supply, retail sales of plant-based meat alternatives have surged 218% over a 16-week period ending in June, compared with the year-ago period, Nielsen data shows. By contrast, the market for products at a premium price may narrow further.
Data even from mere months ago has limited value, and historical trends have been scrambled. Plotting the future by looking to the past makes even less sense now.
2. Reorient supply chains around resiliency, not just efficiency
These trends — in the foods that people prefer, how they are produced and where consumers will eat them — have broad implications across the value chain, highlighting the need to capture and utilize the right data going forward.
Data gives you visibility, informing the changes you should make on the ground and in your operations. The need for new thinking is especially evident in the production and distribution nodes, after years of effort that have made supply chains lean. In good times, that supply chain cost efficiency is particularly useful in a business with low margins.
But, when the signals from consumers have suddenly changed and become more difficult to interpret, that leanness turns into a burden. The system isn’t set up to quickly shift to other plants, packaging for individuals instead of commercial uses, or different routes of distribution. It’s that lack of agility in the supply chain that is creating shortages and excess in all the wrong places. Agility and resiliency — by necessity demanding more tradeoffs with efficiency — must be more prominent.
For instance, perhaps lettuce shouldn’t be grown primarily on the West Coast. If there’s a drought in California or a pandemic that clogs the traditional efficiency-focused supply chain, national shortages could result. Farmers in the Midwest who are growing corn — a crop that’s expected to be less in demand over the long term — can explore different high-margin vegetables.
Shortening the supply chain can eliminate nodes that exist today between producers and consumers and provide greater visibility into how food is grown and treated, aligning companies with the stated desires of buyers. It’s worth exploring how your supply chain can be more regional and/or local, which will also allow for greater personalization, another consumer preference. Yet an open question is whether consumers are willing to accept higher prices, especially during an economic recession. Hyper segmentation of consumer markets is necessary for aligning those consumers with producers and the cost pools in between.
3. Rethink how get work done and who does it
While there are hundreds of meat processing plants in the United States, about 15 or so mega-plants play an enormous role in the supply chain. For instance, just one plant in South Dakota processes 5% of the nation’s pork, and it closed amid an outbreak. A little more than 50 plants process up to 98% of beef in the United States, the New York Times reported. With so many people working closely together in mega-plants, they have become the epicenters of some of the nation’s worst outbreaks of COVID-19, prompting the unprecedented move by the Trump Administration to treat these workers as essential and limit the potential legal liability of their employers.
More comprehensive risk assessments and contingency planning are essential to safeguard employee health and safety and to operate under difficult circumstances. Plant owners can rethink the layouts of these operations and automation for times of crisis, but they should also be prepared for possible regulatory policy interventions that mandate changes, particularly in the meat industry, as it is dominated by four major players and is embroiled in a price-fixing Department Of Justice investigation.
More broadly, the sector faces deeper talent challenges, posed by tighter immigration restrictions and a lack of interest among the younger generation of workers. Companies can review their tech and R&D investments and find greater risk mitigation in automation. These solutions are expensive and still evolving, and they can pose reputational risks in the market. But there’s still opportunity to bring investment into innovation. For example, through data analysis of unemployment hotspots, you can better identify where the need is greatest across the industry and develop temporary workforce solutions.
While businesses are confronting enormous challenges today, the good news is that agility and resiliency are just as useful in addressing future disruptions.
